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Frack sand producer Hi-Crush Partners reported third quarter earnings Tuesday. $HCLP had already cut it's guidance and dividend after acquiring it's general partner last week. Pricing for frac sand has backed off with the Permian bottleneck.


Fracking Sands Hi Crush

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Last week Hi-Crush peer, U.S. Silica Holdings (SLCA) shares were pummeled over 10.5 % after it's third quarter earnings missed expectations.

Hi-Crush Partners LP NYSE: HCLP Report Earnings After Close Tuesday

$0.30 Beat Forecast $0.29 EPS

Earnings

Hi-Crush Partners LP (NYSE:HCLP) reported earnings of $26.5 million, or 30 cents a share, for the third quarter ending Sept. 30. That is down 10.9 percent compared to the $29.8 million, or 33 cents a share, it earned in the same period of 2017. Analysts expected Hi-Crush to earn 29 cents a share for the current quarter. Revenues rose 27.7 percent in the third quarter year-over-year. 

Hi-Crush Partners Q2 earnings were $0.67 EPS, missing the consensus estimate of $0.77. The company had revenue of $248.52 million during the quarter, compared to analysts’ expectations of $250.12 million.

Hi-Crush Partners LP NYSE: HCLP on Friday closed at $8.40 +0.67 (+8.67%) and a 52-wk high of 16.65 and a  52-wk low of 7.35

Hi-Crush Partners LP NYSE: HCLP

Market Reaction After Hours8.07▲ 0.04 (0.50%)

Highlights

  • The company sold nearly 2.8 million tons of sand in the third quarter, an increase of nearly 13 percent compared to the 2.5 million tons it sold in the same period of 2017.
  • Contribution margin per ton of $23.92 in 3Q 2018 vs. $30.94 in 2Q 2018 and $19.39 in 3Q 2017
  • Volumes sold through PropStream® increased to 24% of sales
  • Volumes sold direct to E&Ps increased to 40% of sales

"The third quarter experienced a rapid change in market conditions in the frac sand sector," said Mr. Robert E. Rasmus, Chairman and Chief Executive Officer of Hi-Crush. “This change, attributable to declines in well completion activity and therefore demand for frac sand, impacted the market for Northern White volumes and pricing, which we expect to continue in the fourth quarter. The accelerated pace of slowdown in well completion activity, combined with supply additions and build-up of inventories in-basin, resulted in lower pricing for Northern White sand across all basins. We remain committed to our Mine. Move. Manage. operating strategy and to expanding our frac sand logistics solutions offering. We believe our focus on logistics will differentiate Hi-Crush and continue to benefit unitholders, particularly as the market rebounds in 2019 due to operator budget resets and the alleviation of takeaway capacity constraints in the Permian Basin.”

Hi-Crush Partners Acquires General Partners, Cuts Distribution, Q3 Revenue

On Oct. 22, 2018 Hi-Crush Partners LP (HCLP) announced it would acquire its general partner, cutting its quarterly distribution to $0.225/unit from $0.75/unit and offering preliminary Q3 results.

HCLP says it has acquired its general partner by acquiring Hi-Crush Proppants for 11M newly issued common units, valued at $96.25M based on Friday's closing price of $8.75/unit. HCLP says the deal simplifies its corporate structure; incentive distribution rights are eliminated.

Six members of HCLP's board have resigned, including seats held by Avista Capital Partners and its appointees. Additionally, HCLP forecasts Q3 revenues of $210M-$215M, below $229M analyst consensus estimate, on sales volumes of 2.775M tons.

"The market for frac sand began to soften in early August due to a temporary decrease in completions activity, as reflected by the previously announced reduction in our volume outlook" for Q3, HCLP says. "This temporary weakness accelerated throughout September and continues through today. The decision reached on the distribution by the board reflects these market conditions."

About Hi-Crush

Hi-Crush is an integrated producer, transporter, marketer and distributor of high-quality monocrystalline sand, a specialized mineral that is used as a proppant to enhance the recovery rates of hydrocarbons from oil and natural gas wells. Our reserves, which are located in Wisconsin, consist of "Northern White" sand, a resource that exists predominately in Wisconsin and limited portions of the upper Midwest region of the United States. Hi-Crush owns and operates the largest distribution network in the Marcellus and Utica shales, and has distribution capabilities throughout North America.

Source: Hi-Crush

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